1988 (3) TMI 104 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee is entitled to a deduction under Section 80C of the Income-tax Act, 1961, for the National Savings Certificates (NSC) purchased.
2. Determination of the relevant date for the deduction claim under Section 80C-whether it is the date of cheque issuance or the date of NSC issuance.

Issue-Wise Detailed Analysis:

1. Entitlement to Deduction under Section 80C:
The primary issue is whether the assessee is entitled to a deduction under Section 80C of the Income-tax Act, 1961, for the NSC purchased. The assessee claimed a deduction for NSCs purchased, presenting a photocopy of the NSC as evidence. However, the Income-tax Officer (ITO) denied the deduction because the NSC was issued on 12-4-1985, which did not fall within the relevant assessment year ending on 31-3-1985. The assessee argued that a cheque dated 27-3-1985 was given for the purchase, and the delay in issuance was due to procedural reasons. The Appellate Assistant Commissioner (AAC) upheld the ITO's decision, reasoning that the payment date for the NSC is the date when the cheque proceeds are realized and credited to the government account, which in this case was after 31-3-1985.

2. Relevant Date for Deduction Claim:
The central controversy revolves around the interpretation of the term "subscription" under Section 80C(1) read with sub-section (2)(h) of the Income-tax Act, 1961. The assessee contended that the cheque issuance date (27-3-1985) should be considered as the subscription date. The Tribunal examined the definition of "subscription" and the role of the authorized agent in this context. It was noted that the authorized agent, Shri Sarabjit Singh Bedi, received the cheque on 27-3-1985, and a receipt was issued on the same date. The Tribunal referred to Rule 8 of the National Savings Certificates (VII Issue) Rules, 1981, which states that a cheque is a legal tender for the purchase of NSCs. Therefore, the act of handing over the cheque constituted a valid subscription.

The Tribunal further clarified that the term "subscribe" means to make oneself liable for something, and in this case, the assessee had subscribed to the NSC by handing over the cheque to the authorized agent. The Tribunal emphasized that the relevant date for the deduction claim is when the subscription was made, i.e., when the cheque was handed over, not when the NSCs were issued.

The Tribunal also referred to Section 18 of the Evidence Act, which allows statements made by an agent to be admissible against the principal. Since the authorized agent issued a receipt on 27-3-1985, it was deemed that the subscription was made on that date.

Conclusion:
The Tribunal concluded that the assessee had fulfilled the requirements of Section 80C(1) read with sub-section (2)(h) of the Income-tax Act, 1961, by making a legal tender (cheque) on 27-3-1985. Therefore, the assessee is entitled to the deduction under Section 80C for the assessment year 1985-86. The date of NSC issuance (12-4-1985) is not relevant to the context of claiming the deduction. The appeal was allowed, and the assessee's claim for deduction under Section 80C was upheld.